The Peruvian government on Monday approved a measure enabling Petroperu to obtain private loans aimed at resolving a liquidity squeeze at the state-owned oil company.
Under an emergency decree, the Finance Ministry has the authority to assume contingent commitments with domestic or international parties for a total not to exceed $2 billion to support Petroperu's operations. The decree explicitly includes provision for up to $500 million in short-term obligations. These provisions were published in Peru's official gazette following public reports in recent weeks that Petroperu had flagged strains in its liquidity position.
At a press briefing, Prime Minister Luis Arroyo framed the move as a guarantee of fuel availability, stating: "We are guaranteeing the fuel supply." He added a reassurance on fiscal footing: "Not a single sol from Peruvian taxpayers' money will be touched, the funds will be financed by international private banks."
To facilitate the new financing, the plan calls for the creation of a Petroperu subsidiary that will be linked to a trust. That trust will be administered by ProInversion, Peru's private investment promotion agency, according to Luis Del Carpio, the head of the agency.
The authorization covers contingent commitments with both domestic and international entities and is intended to underwrite Petroperu's ongoing operations. The decree's publication in the official gazette formalizes the government's temporary ability to provide the fiscal backstop required by lenders without direct upfront disbursement from the state budget, as described by officials.
Details about the precise terms, counterparties, or timing for the contemplated financings were not outlined in the decree beyond the maximum amounts and the institutional arrangement involving a dedicated subsidiary and a ProInversion-managed trust.
Clear summary
The Peruvian government has authorized Petroperu to access private loans to address liquidity concerns. An emergency decree allows the Finance Ministry to assume contingent commitments up to $2 billion, including $500 million for short-term obligations. A new Petroperu subsidiary and a trust run by ProInversion will be used to secure financing, with officials emphasizing that international private banks will provide the funds and that taxpayer money will not be used directly.
Key points
- The government approved an emergency decree permitting contingent commitments up to $2 billion to support Petroperu.
- The measure includes authorization for $500 million in short-term obligations and was published in Peru's official gazette.
- A Petroperu subsidiary will be created and a trust managed by ProInversion will be used to secure financing; Prime Minister Luis Arroyo said international private banks will finance the arrangement and taxpayer funds will not be tapped.
Risks and uncertainties
- Contingent commitments assumed by the Finance Ministry create potential fiscal exposure for the state if obligations are called upon, affecting public finance and sovereign contingent liabilities.
- Petroperu's previously reported liquidity concerns indicate a continuing operational funding need until secured financing is in place.
- The plan relies on financing from international private banks and execution depends on successfully arranging those loans under terms not specified in the decree.